Tennessee Has No Personal Income Tax on Wages or Salaries in 2025

Key Takeaways

• Tennessee imposes no state income tax on wages, salaries, or investment income since January 1, 2021.
• All residents, non-residents, immigrants, and visa holders are exempt from Tennessee state income tax.
• Employers do not withhold state income tax; sales tax averages 9.56%, property tax about 0.55%.

Tennessee stands out among U.S. states for its unique approach to personal income tax. For anyone considering a move to Tennessee, already living there, or simply interested in how state taxes work, it’s important to understand what makes Tennessee’s tax system different. This guide explains who qualifies for Tennessee’s state income tax rules, what the eligibility criteria are, what documentation is needed, how the process works, and practical tips for meeting all requirements. Whether you’re an immigrant, a long-time resident, a retiree, or a business owner, this information will help you make informed decisions about living and working in Tennessee.

Overview: Who Qualifies for Tennessee’s State Income Tax Rules

Tennessee does not impose a personal state income tax on wages, salaries, or investment income. This means that:

• All individuals living or working in Tennessee—including immigrants, U.S. citizens, and non-residents—are not required to pay state income tax on their earnings.
• Retirees and investors also benefit, as there is no state tax on Social Security benefits, retirement income, interest, or dividends.
• Employers in Tennessee do not need to withhold state income tax from employees’ paychecks.

This policy applies to everyone, regardless of immigration status, employment type, or source of income. The only exception in the past was the Hall Income Tax, which taxed certain investment income, but this was fully repealed as of January 1, 2021.

Eligibility Criteria: Who Is Covered by Tennessee’s No state income tax policy

Tennessee’s no state income tax policy is simple and broad. Here’s who qualifies:

1. Residents of Tennessee
Anyone who lives in Tennessee, whether permanently or temporarily, does not pay state income tax on wages, salaries, or investment income. This includes:

• U.S. citizens
• Permanent residents (green card holders)
• Temporary visa holders (such as H-1B, L-1, F-1, J-1, etc.)
• Refugees and asylees
• DACA recipients

Example:
Maria, an H-1B visa holder working in Nashville, earns a salary from her tech job. She does not have to pay any state income tax on her wages.

2. Non-Residents Earning Income in Tennessee
If you live outside Tennessee but earn income from work performed in Tennessee, you also do not pay state income tax on those earnings.

Example:
John lives in Kentucky but works remotely for a company based in Memphis. He does not owe Tennessee state income tax on his salary.

3. Retirees and Investors
Tennessee does not tax Social Security benefits, retirement income, interest, or dividends. This applies to all residents, regardless of age or immigration status.

Example:
Sofia, a retired permanent resident, receives Social Security and investment income. None of this is taxed by Tennessee.

4. Businesses and Employers
Employers in Tennessee do not need to withhold state income tax from employees’ paychecks. This simplifies payroll and reduces paperwork.

Example:
A small business owner in Chattanooga does not need to set up state income tax withholding for her employees.

5. Former Hall Income Tax Filers
Before 2021, Tennessee taxed certain investment income through the Hall Income Tax. This tax is now fully repealed, so no one needs to file or pay it anymore.

Example:
Raj, who previously filed a Hall Income Tax return for his dividend income, no longer needs to do so after 2021.

Required Documentation: What You Need (and Don’t Need) for State Income Tax in Tennessee

Because Tennessee does not have a personal state income tax, there are no state income tax forms to file for individuals. This includes:

• No state income tax return for residents or non-residents
• No state tax forms for reporting wages, salaries, interest, or dividends
• No state tax forms for Social Security or retirement income

What You Should Keep for Your Records:

Even though you don’t file a state income tax return, it’s wise to keep the following documents for your own records and for federal tax purposes:

• W-2 forms (showing your wages and federal tax withheld)
• 1099 forms (for interest, dividends, or other income)
• Social Security statements (if you receive benefits)
• Proof of residency (such as a lease, utility bill, or driver’s license)
• Previous Hall Income Tax filings (if you filed before 2021, for your records)

Official Resources:

• For more information on Tennessee’s tax system, visit the Tennessee Department of Revenue.
• For property tax information, see the Tennessee Comptroller of the Treasury.

Application Process Overview: What to Do (and Not Do) About State Income Tax in Tennessee

1. No State Income Tax Return Required
If you live or work in Tennessee, you do not need to file a state income tax return for your wages, salary, or investment income. This applies to all residents, non-residents, and visa holders.

2. No State Income Tax Withholding
Employers do not withhold state income tax from paychecks. You will only see federal income tax, Social Security, and Medicare withheld on your pay stubs.

3. Focus on Federal Tax Filing
You must still file a federal income tax return with the Internal Revenue Service (IRS) if you meet the federal filing requirements. This is separate from state taxes.

4. Sales and Property Tax Compliance
While there is no state income tax, Tennessee relies on sales and property taxes for revenue. Residents and businesses should:

• Pay attention to sales tax on purchases (state rate is 7%, with local additions averaging a combined 9.56%)
• Pay property taxes if you own real estate (average rate is about 0.55% of assessed value, but this varies by county)

5. No Hall Income Tax Filing
The Hall Income Tax, which used to apply to interest and dividends, was repealed as of January 1, 2021. No one needs to file or pay this tax anymore.

6. Special Situations
If you have questions about other taxes (such as business tax, franchise and excise tax, or inheritance tax), check with the Tennessee Department of Revenue or a tax professional.

Practical Tips for Meeting Tennessee’s Tax Requirements

1. Keep Good Records
Even though you don’t file a state income tax return, keep all your income documents (W-2s, 1099s, Social Security statements) for at least three years. You may need them for federal tax filing or if you move to another state.

2. Watch for Sales Tax
Tennessee has one of the highest combined sales tax rates in the country. When budgeting, remember that most goods and some services will have sales tax added at the point of sale.

3. Understand Property Tax Rules
If you own a home, property taxes are due each year. Rates vary by county, so check with your local assessor’s office for details.

4. No Need to File for State Income Tax Refunds
Since there is no state income tax, you cannot claim a refund for state income tax withheld—because none is withheld.

5. Be Aware of Federal Tax Obligations
Your federal tax obligations remain the same, regardless of Tennessee’s state income tax policy. File your federal return on time and pay any taxes owed to the IRS.

6. For Immigrants and Newcomers
If you are new to the United States 🇺🇸 or Tennessee, you may be used to filing state income tax returns in other states. In Tennessee, you only need to focus on federal taxes and local taxes like sales and property tax.

7. For Retirees and Investors
Tennessee is especially friendly to retirees and investors, as there is no state tax on Social Security, pensions, 401(k) withdrawals, IRAs, or investment income.

8. For Employers
Payroll is simpler in Tennessee because you do not need to set up state income tax withholding. Make sure you are compliant with federal payroll tax rules and Tennessee’s unemployment insurance requirements.

9. For Former Hall Income Tax Filers
If you previously paid the Hall Income Tax, you no longer need to file or pay this tax. Keep your old records for your files, but no action is needed going forward.

10. Stay Informed
Tax laws can change, so check the Tennessee Department of Revenue website each year for updates. As of 2025, there are no plans to introduce a state income tax.

Frequently Asked Questions

Q: Do I need to file a state income tax return in Tennessee?
A: No. Tennessee does not have a personal state income tax, so no return is required.

Q: What if I work in Tennessee but live in another state?
A: You do not owe Tennessee state income tax on your earnings. However, check if your home state requires you to pay income tax on income earned in Tennessee.

Q: Are Social Security benefits taxed in Tennessee?
A: No. Tennessee does not tax Social Security benefits or other retirement income.

Q: What is the Hall Income Tax?
A: The Hall Income Tax was a tax on interest and dividends. It was fully repealed as of January 1, 2021, so it no longer applies.

Q: What taxes should I be aware of in Tennessee?
A: The main taxes are sales tax (average combined rate of 9.56%) and property tax (average 0.55% of assessed value).

Q: Where can I get more information?
A: Visit the Tennessee Department of Revenue for official information on all state taxes.

Comparing Tennessee to Other States

Tennessee is one of only nine states with no personal income tax. The others are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, and Wyoming. Some of these states, like New Hampshire and Washington, still tax certain investment income, but Tennessee does not.

This makes Tennessee attractive for people who want to avoid state income tax, especially retirees, high earners, and business owners. However, it’s important to remember that Tennessee’s sales tax is among the highest in the country, which can affect your cost of living.

Key Facts About Tennessee’s State Income Tax Policy for 2025

• No state income tax on wages, salaries, interest, dividends, or retirement income
• No state income tax return required for individuals
• No payroll withholding for state income tax
• No Hall Income Tax (fully repealed as of January 1, 2021)
• High sales tax (average combined rate of 9.56%)
• Low property tax (average 0.55% of assessed value)
• Applies to all residents, non-residents, immigrants, and visa holders
• No current plans to introduce a state income tax

Summary Table

As reported by VisaVerge.com, Tennessee’s continued policy of no state income tax makes it a favorable destination for those seeking to reduce their tax burden. However, residents and newcomers should plan for higher sales taxes and be aware of property tax obligations.

Actionable Takeaways

• If you live or work in Tennessee, you do not need to file a state income tax return.
• Keep all income documents for federal tax purposes and your own records.
• Budget for higher sales taxes on most purchases.
• Pay attention to property tax bills if you own a home.
• Check the Tennessee Department of Revenue website for updates each year.
• If you are new to Tennessee, focus on federal tax filing and local taxes, not state income tax.

For more details, always refer to the Tennessee Department of Revenue, which provides up-to-date and official information on all state taxes.

In summary, Tennessee’s lack of a state income tax, including the full repeal of the Hall Income Tax, means simpler tax filing and potentially lower overall tax burdens for many people. By understanding the state’s reliance on sales and property taxes, you can better plan your finances and avoid surprises. Whether you’re an immigrant, retiree, business owner, or employee, Tennessee’s tax system offers clear benefits and straightforward requirements for 2025 and beyond.

Learn Today

Hall Income Tax → Former Tennessee tax on interest and dividends, fully repealed as of January 1, 2021.
State Income Tax → Tax imposed by a state on an individual’s wages, salaries, or investment income.
Non-Resident → Person who earns income in a state but resides outside that state’s borders.
Payroll Withholding → Employer deduction of income taxes from employees’ paychecks for remittance to tax authorities.
Sales Tax → A tax on purchases, Tennessee’s state rate is 7%, local additions raise it to 9.56% on average.

This Article in a Nutshell

Tennessee’s unique tax system has no personal state income tax for residents or non-residents, including immigrants. This policy simplifies payroll and benefits retirees and investors. Though sales and property taxes exist, Tennessee offers significant tax advantages compared to many states, especially after repealing the Hall Income Tax in 2021.
— By VisaVerge.com